One of the benefits of a system of litigation that allows for the award of punitive and other open-ended “damages” is that the litigation may force the defendant to “internalize” the full costs of its actions. A negligent driver not only has to pay for the medical bills of the person that he or she inures, but also for the “pain and suffering” that the negligent act has caused. In this way, one economic model suggests, people are encouraged to avoid conduct that might cause a large amount of “harm,” as broadly defined. But a system of open-ended damages can also have powerful effects upon people who are not parties to the litigation. In the famous nuisance case of Boomer v. Atlantic Cement Co., 257 N.E.2d 870 (N.Y. 1870), a business that clearly was causing a land use nuisance to the plaintiff was not forced to stop its conduct, in large part (the court ruled) because this might have caused the loss of jobs at the business. And even some liberals are encouraging President Obama to support caps on medical malpractice litigation awards, in order to curb the costs of medical care. An interesting land use example of this phenomenon is playing out in the small town of Westfall, Pa. There, according to the story, a developer has secured a judgment of about $20 million against the town; the developer argued successfully that local government officials – in the 1980s – conspired unlawfully against him to change zoning and land use laws to stop him from building a condominium development . Now many years and many litigation steps later, the town government, whose budget is only a fraction of the judgment, has filed for bankruptcy protection. It remains to be seen whether the bankruptcy action will proceed, or whether any Westfall jobs will be lost as a result of the judgment. And skepticism of the judgment in no way excuses the conduct of the town. But just as open-ended damage awards force a defendant to internalize the full costs of its unlawful conduct (and deter them), court should realize that a judgment involving a government’s land use action is likely to have adverse repercussions that may be “paid” in part by people who are innocent of the town government’s conduct …

Ask an economist what happens if you regulate by law the supply of a good, and the economist will tell you that, not only will the price of that good rise, but that people will seek out alternatives that are not so regulated. Thus the economic concern about metro areas that seek to combat sprawl by limiting the provision of governmental services is that the regulation may push development even further out. While anti-sprawl regulations may indeed hamper sprawl at the edges, the metro area’s jurisdiction probably extends only so far. Once we get beyond the jurisdiction of the governmental authority, rural land may seem more attractive. Thus, efforts to combat traditional sprawl may engender extreme sprawl. Does this theoretical effect really happen in practice? A designer and author in Minnesota asserts that it did happen in southern Minnesota in the recent go-go housing boom. Writing in New Geography last week, Rick Harrison tells of an extraordinary boom in the price of rural land outside the Twin Cities’ Metropolitan Council’s jurisdiction. Although the famously integrated Metropolitan Council has planning control over seven counties, one can avoid it by driving 40 miles out of downtown Minneapolis. With good highways, moderate gas prices, and jobs in the suburbs, many developers and homebuyers were lured to these rural locations, resulting in a remarkable “bidding war” over developable land, according to Harrison. While the housing bust has slowed this extreme sprawl, the economic lesson is clear: When you regulate something, you encourage people to avoid the restriction, with a result that the purposes of the regulation may be frustrated. This is not to say that anti-sprawl policies are always bad (indeed, some may say that the story should encourage planning control at an even wider geographic level). But policymakers in land use law should be prepared for the flies that appear, with the regularity of science, in their ointments …

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Editors

Craig Anthony Arnold

Boehl Chair in Property and Land Use Professor of Law
Affiliated Professor of Urban Planning
Ph.D. Faculty in Urban and Public Affairs
Chair of the Center for Land Use and Environmental Responsibility,
University of Louisville